RAC auditors are paying attention to all types of providers – not just hospitals – including physician practices, skilled nursing facilities and medical equipment suppliers.
With the number of audits on the rise and a controversial expansion looming, the National Recovery Audit Contractor program - the government's effort to cut down Medicare overpayments, errors and fraud - is at the forefront this year for healthcare administrators.
And it's not just hospitals that have to worry about compliance. The RAC auditors are also paying attention to other types of providers, including physician practices, skilled nursing facilities and medical equipment suppliers.
“In today's healthcare, whether you are a physician, an administrator for a physician practice, a hospital, you have to be concerned about the RACs,” said Jim Hoover, an Alabama-based lawyer who works with healthcare industry clients.
“There has been a proliferation of audits, whether it's the Medicare RACs, integrity audits, the new Medicaid RACs,” said Hoover, of the firm Burr & Forman in Birmingham. “If folks are not used to audits, they better get used to them real quick.”
The Centers for Medicare & Medicaid Services estimates that more than $34 billion each year - more than 10 percent of all fee-for-service payments within the Medicare system - is wasted through improper payments.
To help solve that problem, the government established RAC in five states as a pilot program in 2005.
An expansion to the national level over the past few years has yielded big results. In the government's fiscal year 2010, the program recovered $75 million in overpayments, according to CMS.
In the following fiscal year, which ended Sept. 30, 2011, the RAC program collected $797 million in overpayments. Also last year, the program identified $141 million in underpayments.
A planned expansion in the RAC program could ramp up the pressure on healthcare providers. RAC auditors have always used a “pay and chase” method, where claims are paid by the government and later recouped in the case of overpayment. Last fall, though, CMS officials announced that auditors in 11 states would review claims on certain medical procedures before payments are made. The goal was to conduct approximately 2.7 million of the pre-payment audits this year, beginning Jan. 1. But the agency postponed the change, due to a high volume of questions and concerns from providers.
For some Medicare claims, RAC auditors identify an “overpayment” that was actually billed for the correct amount, but appeared to be improper because the coding was not entered correctly, or because of some other clerical error.
Matt Grosvenor, a director at the Atlanta-based accounting firm Bennett Thrasher, said many healthcare providers do not appeal decisions, generally due to a lack of time and resources. Grosvenor noted a recent American Hospital Association survey, showing that when hospitals appealed overpayment decisions, they were successful 77 percent of the time.
Grosvenor is concerned about the administrative burden the RAC program is having on smaller hospitals and medical practices.
“Medicare reimbursement has always been complex. Large providers are accustomed to these complexities and have the resources to address them,” said Grosvenor, who worked as an accountant and controller in the healthcare industry for 15 years. “The smaller you are, the higher the burden.”
Even family physician practices have the RAC audits on their radar screens. Organizations such as the American Academy of Family Physicians have added informational links to their websites, informing members about their rights and responsibilities under the RAC program.
“Physicians need to be as careful as they can be about compliance. They need to be aware of the requirements and train their staff appropriately,” said Cindy Hughes, coding and compliance specialist for the AAFP. “But it should not change the way they practice medicine.”